UK Treasury official plans new criminal offence for tax evasion 'facilitators'

Out-Law News | 24 Feb 2015 | 9:45 am | 2 min. read

Advisers who "facilitate or encourage" tax evasion by companies or individuals should be prosecuted, a senior UK Treasury official has said.

In an interview on the BBC's Andrew Marr show, chief secretary to the Treasury Danny Alexander proposed a new criminal offence of "corporate failure to prevent economic crime", aimed particularly at banks and accountancy firms that promoted illegal tax evasion. Those guilty of the offence should face the same financial penalty as the taxpayer, he said.

Alexander is a member of the Liberal Democrats, the junior partner in the UK's coalition government. He told Marr that he hoped to act on the plans before of the general election in May, but that they would otherwise be included in his party's manifesto.

The proposed financial penalties would create a "very tough disincentive" to firms, Alexander said.

"I am going to seek to pursue this within government over the next few weeks, because I think we do have time, potentially, in the budget or through other processes that we are going through, to take these ideas forward," he said.

"Organisations, be they accountants, banks or whatever, who help people evade tax will be liable for this new offence and crucially liable for financial penalties. So that, for example, if their customers have to pay back hundreds of millions of pounds in tax, then those organisations should have to match that with hundreds of millions of pounds of their own money," he said.

Chancellor George Osborne told MPs in the House of Commons yesterday: “Ahead of the budget I set the Treasury to work on providing further ways to pursue not just the tax evaders but those providing them with advice. Anyone involved in tax evasion, whatever your role, this government is coming after you. Unlike the last government, who simply turned a blind eye, this government is taking action now and will do so again at the budget.”

"Any proposal to introduce a new criminal offence needs careful thought, and consultation with the legal community in particular, before it is introduced," said James Bullock of Pinsent Masons, the law firm behind Out-Law.com.

"It should not be forgotten that there is a current proposal for a strict liability offence of offshore tax evasion," he said. "This was consulted on in the autumn of 2014 having been announced by the chancellor in the spring. We were promised draft legislation and a further consultation in late 2014 - but this never happened, and the assumption has been that this proposal has either been quietly 'dropped' or at least kicked into the next parliament."

"Either way, it would be nice to hear what the proposals for this very contoversial proposal are before embarking on yet another one," said Bullock. "The next government, of whichever colour and complexion, would be much better off concentrating on more prosecutions and investigations within the existing framework, than in coming up with new proposals."

"The specific proposal - creating an obligation on the corporate to prevent tax evasion, with criminal sanction for failure to do so, has close parallels with both anti-money laundering legislation and the anti-bribery legislation," said Bullock. "We are assuming it would contain a defence for corporates that were able to show that they had taken adequate steps to prevent tax evasion."

"Whilst it would be unlikely to result in many convictions it would have the merit of promoting cultural and behavioural change - as the anti-money laundering and anti-bribery legislation has done. However, it clearly needs careful thought and consultation before it is introduced into legislation," he said.

In September 2014, new attorney general Jeremy Wright told a conference in Cambridge that the UK government was "considering proposals for the creation of an offence of a corporate failure to prevent economic crime". This new offence would be "modelled" on the existing criminal offence of failure to prevent bribery, and would tackle fraud, money laundering and other economic crimes, he said.